Orders for Durable Goods Climb in Positive Sign for Economy

New orders for durable goods posted their biggest increase last month since December 2007, the latest sign that manufacturing's decline is easing despite the impending bankruptcy of the nation's largest automaker.

Orders for durable goods -- those that are made to last three years or longer -- are a closely watched barometer of future manufacturing activity. In April, they rose by a larger-than-expected margin of 1.9 percent, the Commerce Department reported yesterday.

That figure is less impressive upon closer inspection, in part because the increase was driven by a huge surge in defense orders, which can change dramatically from one month to the next. Data from March also turned out to be weaker than previously thought. Orders for that month were revised down to minus 2.1 percent, far lower than previously estimated.

Analysts, nonetheless, saw yesterday's report as encouraging.

"Let's not say it's great news because it went up, but it's good news because we're no longer falling," said Joel Naroff, president of Naroff Economic Advisors. "That tells me we're at a turning point. . . . we're getting close to the trough of the recession."

The durable goods report was in sync with other data released earlier this month that suggested the seemingly unchecked slide in manufacturing that began last fall is ending. Manufacturing production fell more slowly in April than in March, the Federal Reserve reported. And a key index of manufacturing activity compiled by the Institute of Supply Management showed the pace of decline moderating.

Manufacturers have a ways to go to offset a steep drop in demand, the Commerce data showed. Businesses managed to shrink excess stockpiles of unsold goods only modestly in April. As long as they face an overhang of inventory, they have little incentive to ramp up production. And they are likely to resort to further layoffs.

The U.S. automakers are grappling with those very kinds of problems. Chrysler, which filed for bankruptcy on April 30, has temporarily shut down its U.S. factories and cut 27,000 jobs. General Motors, which is expected to follow Chrysler into bankruptcy shortly, plans to temporarily close 13 plants over the next two months and shut another 16 permanently.

Layoffs by both companies boosted first-time jobless claims in recent weeks. The number of people filing for unemployment benefits fell last week to 623,000 from 636,000 the previous week, in line with analysts' estimates.

Analysts believe first-time jobless claims likely peaked in April but said the Chrysler and GM layoffs may drive up claims in coming months.